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Fears of higher interest rates and more policy uncertainty from Washington DC gave traders the excuse they needed to sell stocks over the last two weeks. As bad as that may have felt, since its record close on March 1, 2017, the Standard & Poor's 500 Large Cap index of stocks (SPX) had only dropped 1% by March. But things may change rapidly; the current technical picture is one of a market that is at a crucial decision point.

The S&P 500 found support at its 20-day moving average on March 10, while the OBV (On Balance Volume) indicator bounced higher. This is a bullish development, especially when OBV held its ground during the selling earlier in the week. The MACD (Moving Average Convergence/Divergence) and the MFI (Money Flow Index) had been overbought before the decline and did not suffer terrible damage during the weeklong selloff. This suggests that the selling was more in the line of profit taking than position liquidation. Indeed, OBV is suggestive that traders are once again buying the proverbial dip in the market.

The NYSE Advance/Decline line sold off along with the market, but also seems to have found support at the lower Bollinger Band (Blue line), which is typical behavior for prices and the NYAD as well. The RSI (Relative Strength Indicator) has been an excellent coincident indicator with the NYAD, and it is oversold (lower panel). The ROC (Rate Of Change) indicator suggests the likelihood of a momentum change is also possible (lower panel, second box). Together, the support at the Bollinger Bands and the activity in RSI and ROC suggest that the decline is closer to being over than it is likely to continue.

Overall, the action in the market last week looks like profit taking and not a change in the long term trend, which means, barring a major change, prices are likely to move up again once the Fed makes its move toward higher interest rates. However, if the S&P 500 breaks below 2310, we could see further downside action.

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